£22m Wasted at UK Property Auctions in 2006
12th June 2007
Unsuccessful bidders at UK property auctions rack-up annual losses in excess of £22m, finds auction website Humraz.com.
Humraz researched the cost of the professional services taken up by people wishing to buy property at auctions, such as property Conveyancing Solicitors and Chartered Surveyors. Pre-auction fees can cost upwards of £1000 – With no guarantee of winning the desired property which they want to buy.
For every property auction winner there will necessarily be at least one other losing bidder who effectively wastes a significant chunk of their nest egg.
Based on a conservative estimate of two disappointed potential property bidders per lot and 60% of those bidders spending £1000 on pre-auction surveys, legal checks and mortgage arrangements, Humraz calculate that £21,963,600 was wasted in 2006.
Purchasing property at auction is increasingly fashionable, despite the financial risks involved. Last year 18,303* residential lots were sold at auction in the UK – a 132% increase on the 7,883 auctioned in 1997. The country’s love affair with property has seen TV shows like BBC’s "Homes Under The Hammer" promote auctions as the best way to bag a property bargain.
Humraz – a ‘lowest unique bid’ auction – was designed by mother-of-three Asmat Monaghan as a cost-effective alternative to traditional property auctions. Humraz’s unique auction model and the ‘move-in’ condition of their properties means there’s no need for bidders to invest in any professional services prior to bidding.
‘Because there’s no guarantee of winning, traditional property auctions are a high-stake gamble,’ says Monaghan. ‘We thought there must be a less risky way to help people onto the property ladder. Humraz was the result.’
Humraz works by charging £3 to table a bid. The winner will be the lowest unique (i.e. unmatched) bid. The two-bedroom Woking property currently at Humraz auction is worth £180k, but it will sell for less than £9000, because Humraz limits bids to 5% of the value of anything it auctions. The £3 charge covers the cost of the property and the ‘status messages’ which give bidders clues to help them work-out where the lowest unique bid lies.
‘There is an element of risk involved in our auctions,’ concedes Monaghan, ‘but it’s minimal compared with a traditional property auction. Furthermore, given that our properties will always sell for less than 5% of their market value, the reward is much greater too.’
“If we were asked to sell a property by this method across Leeds, Wakefield, or Wetherby we would have doubts as it would achieve the best price for our house selling clients. At Manning Stainton, if an auction was to be the desired method of sale, we would certainly recommend the traditional approach of competitive bidding with a reserve price to back it up. Property for sale by auction with a reputable estate agent can be a good method of sale for the right property in the right circumstances.” Says David Pank Sales and Marketing Director with Manning Stainton.
